UK companies are facing an incredibly difficult winter as the economic challenges that have pounded the country for close to two years now persist, with levels of financial distress soaring and corporate insolvencies on course for their highest levels since 2009.
One of the major victims of the crunch on consumer spending has been home improvement retailers. While such businesses did solid business in the aftermath of COVID-19, as homeowners embarked on improvement projects they’d delayed during the pandemic, they were among the first businesses hit by factors such as rising costs, supply chain issues and falling consumer confidence.
This has resulted in many previously profitable businesses falling into administration – such as bathroom retailer Victoria Plum. Despite reporting pre-tax profits of £736,000 and turnover of £113.6 million in the year to February 28 2022, Victoria Plum, which was owned by private equity firm Endless, fell into administration at the end of September, citing the cost-of-living crisis and inflation of global freight costs.
Following the appointment of Ernst & Young LLP partners Samuel James Woodward and Timothy Graham Vance as joint administrators on September 29, the business and certain assets – including its head office, UK distribution network and workforce – were acquired by e-commerce retailer AHK Designs Ltd in a pre-pack deal.
While the deal was, naturally a distressed acquisition, AHK Designs Director Aamir Khurshid explained that it also was significant for his firm’s strategic growth plans. Khurshid said: "Victoria Plum is a leading online retailer of bathroom products with a strong brand and market-leading product. We are pleased to be investing in the future of the business and look forward to welcoming all of Victoria Plum's employees into AHK Designs."
R&W Civil Engineering is a Southampton-headquartered business founded in 1981 that provides civil engineering services, with a particular focus on the highways sector. Despite reporting turnover of £31.8 million in its accounts to March 31 2022 and operating profits of £895,000, the company fell into administration earlier this year as a result of the impact of COVID-19 and soaring inflation.
According to the company, its turnover had been hit by secured work being delayed due to COVID-19, before it was subsequently affected by “uncontrollable resource inflation felt across all elements of the construction supply chain”.
Clearly, this was a completely viable, previously successful business that had fallen into insolvency as a result of factors beyond its control. Unsurprisingly, the firm was quickly acquired out of administration by Octavius Infrastructure.
Far from being just another opportunistic distressed acquisition, however, the deal enabled Octavius to build on its strategy of using M&A to enter complementary growth, with the acquisition of R&W significantly bolstering its offering in the highways sector.
Discussing the acquisition, Octavius CEO John Dowsett revealed that R&W was a company that had been “identified in our acquisition strategy some time ago as a great fit both culturally and in terms of their complimentary capability.”
Dowsett continued: “Securing this acquisition supports our ambitious growth plans to become a market leading transport infrastructure provider.”
“The combined offering of Octavius and R&W has the capability to both self-deliver and integrate an SME supply chain to deliver a broad range of highway and civils projects for a variety of customers; from small reactive responses to large major projects, regionally and nationally, safely delivering these with a consistent collaborative approach that is underpinned by our aligned core values.”
Similarly, a retail sector collapse gave a company the chance to acquire a business it had previously targeted, when WoolOvers Group struck a deal to acquire footwear retailer Hotter Shoes out of administration in a £6.7 million pre-pack deal.
WoolOvers previously sought to acquire the company solvently in April 2023, but was outbid by a party that later withdrew their offer. Subsequently, following a strategic review of the business, it was placed into administration in July, enabling WoolOvers to make its move.
While many distressed takeovers involve the target being absorbed into the buyer’s own operations and brand, WoolOvers CEO Mike Lester said that Hotter Shoes’ status as a prominent footwear retailer meant that it would continue to trade as a standalone entity, through its existing network of stores and e-commerce site, with the buyer also planning to bring back the company’s mail order catalogue ahead of the Autumn/Winter season.
Lester commented: “We are trying to stabilise the business and to focus on getting the stock in place for autumn/winter. It’s a well-loved heritage brand and we want to get it up to where it was as quickly as possible.”
“We will start direct mail marketing again. Historically, the business has had a strong catalogue-driven business, driving traffic both online and into call centres. We plan to get that up [and running] for the autumn/winter season."
“We will continue to operate its own standalone ecommerce property and we intend to run the brand as a distinguished entity, and it wouldn’t be merged into WoolOvers. We absolutely plan to continue operating all the stores and concessions. We see them as a key tool to engage with the customers and a key part of the heritage.”
In late July 2023, business newspaper City AM fell into administration and was acquired by e-commerce technology group THG. The free paper, which was established 18 years ago, had established itself as a leading London business paper, with a daily run of 70,000 papers distributed from around 400 travel and commuter hubs and at approximately 1,600 London offices.
However, as COVID-19 put a stop to office-based work, City AM stopped printing its paper in March 2020. As a result of this loss of readership, the company was hit by declining ad revenues and, subsequently, rising printing costs when publication resumed. This ultimately led to it being placed into administration, before being acquired by THG in a pre-pack deal.
In August, it was revealed that THG had acquired City AM with an offer of £1.5 million and that the group was the only bidder, giving it a free run at a company that holds syndication partnerships with the likes of Bloomberg and Google.
Documents released by City AM’s administrators, BDO, revealed that the loss of readership during COVID - and the resulting fall in ad revenue - saw the company’s turnover drop from 61 per cent from £7.6 million in 2019 to just £3 million the following year, while it fell from a pre-tax profit of £218,000 to a loss of over £0.5 million in the same period.
After printing resumed in October 2021, the company recovered to report turnover of £3.7 million and a pre-tax profit of £59,000 during 2021. However, BDO said that it continued to face challenging trading conditions and, while revenue increased further to £6.1 million in 2022, it fell to a £584,000 pre-tax loss.
Efforts to secure additional funding subsequently broke down, prior to the company entering administration. A deadline of July 14 was set for offers to be submitted, by which time none had been received. However, on the deadline, THG made its offer to acquire the business and its assets, excluding liabilities, for £1.5 million.
BDO said the business and assets were sold "for an amount which exceeds the value that is likely would have been realised had the company ceased trading and the remaining assets (including intellectual property) sold subsequent to a winding up process".
Following the sale, BDO documents revealed that City AM’s secured creditors included Metro Bank (which was owned more than £750,000 of an £800,000 CBILS loan), SME Invoice Finance (SMEIF - which was owed £328,147) and HMRC (which was owed around £677,000).
Of these secured creditors, SMEIF and HMRC are expected to receive all their money back, while Metro Bank will receive between 44p and 75p in the Pound. However, unsecured creditors claim they are owed more than £2 million and the joint administrators have received claims totalling more than £2.36 million.
This practice, which was established over 40 years ago, is available for sale due to the impending retirement of the practitioner.
This practice, which was established in the 1980s, is available for sale due to the impending retirement of the partners.
This practice, which was established around 2003, is available for purchase due to the impending retirement of the partners.
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